October 12, 2001
By Stephan Herrera
Red Herring
This article is from the October
1, 2001, issue of Red Herring magazine.

Brain disorders don't have the same
media cachet and pop culture pathos as cancer, but they represent a far
larger drain on society and the economy. In the United States, somewhere
between 5 million and 6 million people have cancer, which saddles the economy
with an estimated $107 billion in annual health care costs and lost productivity
due to illness and death. Meanwhile, central nervous system (CNS) disorders,
which range from depression to Alzheimer's disease, afflict tens of millions
of people in the United States and cost the U.S. economy $600 billion a
year.

The worldwide market for drugs that
target CNS disorders is $37 billion, according to IMS Health, a health-care
consultancy. Only cardiovascular drugs -- with sales of $43 billion --
represent a larger market. But with a growth rate of 20 percent per year,
CNS represents the fastest-growing category of prescription drugs in the
world. Investors are taking notice. Venture capitalists have plowed $240
million into this category in the last 12 months, twice the amount invested
a year earlier.

Why the sudden interest in CNS drugs?
The dirty little secret is that first-generation CNS drugs are flawed,
and yet still earn billions of dollars for their makers. The drugs are
merely palliatives, meaning they treat only symptoms; they do not slow
or reverse the progression of disease. They also come with side effects
ranging from hallucinations and blackouts to death. Second-generation drugs,
which are still in various stages of clinical trials, represent a small
leap forward, but nobody is expecting anything capable of reversing the
course of brain diseases. The best hope for disease treatment lies instead
with a third generation of therapeutic drugs still largely in the early
stages of development. Simply put, so little is known about brain disorders
that drugs capable of producing any therapeutic result have yet to be found.

The rival approaches of two upstarts
located only two miles down the road from each other in San Diego could
help all that. Known loosely as the amyloid and mitochondrial-dysfunction
approaches (for the proteins and organelles they involve, respectively),
early studies indicate that they might slow or block the brain-cell death
that is the hallmark of most brain disorders. Both amyloid deposits and
mitochondrial breakdowns are present in a great many CNS disorders, leading
some researchers to characterize the rivalry between these approaches as
a chicken-and-egg situation. "Contrary to what each side thinks, we really
don't know yet which one comes first," says Mark Smith, an associate professor
of pathology at Case Western Reserve University.

Although there are other promising
approaches to treating CNS disorders, for the better part of two decades,
the amyloid approach has been the major preoccupation of neuroscience.
A small army of amyloid researchers and biotech firms, which have raised
millions of dollars on the premise that there is no better approach, have
devoted themselves to the effort -- with promising results. Meanwhile,
efforts to explain the role mitochondria might play in these maladies are
relatively young. "Is there even a single mitochondria drug in animal models
yet?" asks Gönül Veliçelebi, vice president of biology
and genomics at the privately held Neurogenetics, which is developing drugs
based on the amyloid platform. The company isn't even a year old, and already
it has raised $17 million from Alta Partners, Advent International, Novartis
Venture Fund, and SR One (GlaxoSmithKline's venture arm), and it is partnering
with Eisai, the Japanese drug giant that makes Aricept, one of the first
Alzheimer's drugs on the market.

Taking the other approach is MitoKor,
a startup using mitochondria research to develop drugs for diseases of
aging, like stroke, amyotrophic lateral sclerosis (ALS, or Lou Gehrig's
disease), and Alzheimer's disease. Aside from competition from the likes
of Neurogenetics, MitoKor's chief obstacle is medicine's time-honored tradition
of dismissing every new approach until it becomes obvious that the method
in question will attract funding. "This mitochondrial approach is new and
threatening to the CNS establishment," says James Dykens, associate director
of business development at MitoKor. The four-year-old company, however,
is winning converts. It has raised $50 million from VC firms like Alta
Partners, Domain Associates, MDS Capital (Toronto), and Forward Ventures,
and it is collaborating with Pfizer (NYSE: PFE) on research.

For both companies -- and their divergent
approaches -- the stakes are enormous. Three of the world's top-ten selling
drugs -- Prozac, Zoloft, and Paxil -- are for CNS disorders, and together
hauled in $6 billion is sales last year. It's easy to imagine a drug for
Alzheimer's or Parkinson's diseases bringing in similar revenue.

If early laboratory success with
these two competing approaches translates into definitive clinical results,
they will have a dramatic effect. They would radically change the way CNS
disorders are treated and, quite possibly, redirect billions of research
and investment dollars that have been primarily chasing new versions of
first-generation CNS drugs.

CNS disorders are especially vexing
because unlike, say, cancer, their incidence rates are not dropping, and
they do not typically kill their victims. Instead, the disorders render
people profoundly and progressively disabled for the rest of their lives.
For example, most people do not die from the onset of Parkinson's disease
or stroke. Over time, however, they can't work or care for themselves.

Unfortunately, today's drugs are
of little help. A person with a CNS disorder will spend the rest of his
life on an ever-changing cocktail of prescription drugs. And because eventually
his body develops drug tolerance, he will require ever-increasing dosages
to get the same relief.

CNS disorders have been such a hard
medical nut to crack because, with the brain, nothing is straightforward.
Take, for example, tissue samples for biopsies, which are the cornerstone
of diagnosis. You can't scrape or cut away tissue from the brain -- at
least not from one that happens to be nestled inside the skull of a living
patient. And even if brain diagnostics were not so problematic, there is
the physio-biochemical challenge of getting a drug into the brain.

The brain is protected by a layer
of enmeshed cells, the blood-brain barrier, which is designed to keep out
uninvited visitors like, for example, a blood-borne virus that could loose
a disease on the defenseless brain. In the mid-'90s, however, a technique
to breach the barrier with small molecules was developed, but the ensuing
drug-delivery technologies are still in the early stages of development.
But diagnosing disease and delivering a potential cure remain moot points
if doctors don't know what they're looking for.

FUEL CELL

A mitochondrion is a bean-shaped
organelle that resides in the cytoplasm of every cell. One of the more
unsung heroes of cellular life, mitochondria use electron transport and
fatty-acid metabolism to provide energy for cells. In 1998, an ALS study
conducted at the University of Massachusetts Medical School found that
free radicals -- the highly toxic and reactive oxygen molecules that injure
cell structure -- and mitochondrial failure in motor neurons occur just
before the disease's symptoms arise. Other researchers studying the enterprising
organelle went on to discover that in 95 percent of the cases of stroke,
Alzheimer's disease, and ALS, there are elevated levels of free radicals
and crashed mitochondria. Skeptics -- and there are many -- say that's
correlation, not causation.

The advantage of potential drugs
from MitoKor that target the mitochondria of brain cells is that a single
compound might be effective in treating several different CNS disorders.
The downside is that they may never cure the patient. Mitochondria-focused
drugs "may delay the death of neurons, but they won't necessarily stop
the disease process," says Mark Mattson, a senior investigator at the National
Institutes of Health's National Institute on Aging.

Though it is still new and unproven,
the mitochondrial-dysfunction method is the most theoretically robust approach.
After all, mitochondrial failure is observed in everything from stroke
to ALS. It stands to reason that MitoKor has a valid approach to these
disorders by focusing on developing a drug that repairs and restores mitochondrial
function.

PROTEIN SPIRIT

In the medical field, proteins, even
pieces of protein known as amyloids, make for more easily validated drug
targets than do complex organelles, like mitochondria. Amyloid is protein-based
debris that is the by-product of a larger protein called amyloid-precursor
protein. Like cholesterol in arteries, when amyloid is produced in excess,
it becomes a problem. When this sticky substance accumulates in brain cells,
it can destroy them. Excess amyloid also fosters the production of excess
free radicals that can cause inflammation in the brain, a condition that
can eventually be fatal. Cell mutations that produce amyloid deposits,
however, account for only 5 to 10 percent of Alzheimer's cases. Nonetheless,
the neuroscience establishment is keen on the amyloid approach and skeptical
of the mitochondrial one.

"If a company has already invested
a lot of money on amyloid, they're not going to bail if they are just on
the edge of finding out whether that research will pan out," says Mr. Dykens
of MitoKor. "The mitochondrial approach is not new, but it's finally coming
to the fore now."

Mr. Dykens has the lonely task of
playing mitochondria ambassador to the CNS and investment communities.
At a neuroscience conference at Princeton University in July, Mr. Dykens
said he felt his message was finally starting to get through. "Once again,
I was the token amyloid contrarian at the meeting, but for the first time,
I really came away thinking that when folks are honest with themselves
and divested from their own long-term interests, they see what we see:
a powerful approach," he says.

Powerful indeed, if one considers
that the advance of neurodegenerative disorders is the result of dying
neurons. What causes brain cells to die is still a mystery, but it is well-known
that mitochondria play a role in the aging of cells and ultimately in apoptosis,
or cell death. Also, mitochondria serve as the main site for the production
of free radicals. Any abnormality that interferes with the cell's normal
production or purging of free radicals can cause the mitochondrial damage
that leads to cell death, too.

"Within the mitochondria there are
many of the messengers that induce apoptosis," says Doug Turnbull, a medical
doctor and professor of neuroscience at the University of Newcastle Medical
School in the United Kingdom.

Preclinical studies in cell culture
and animal models indicate that drugs that stabilize mitochondrial health
and function can prevent neuronal death. Dr. Turnbull's specific clinical
interest is in patients with primary mitochondrial disease. Relatively
rare and incurable, there are more than 50 known diseases that result from
mutations or deletions of the mitochondrial DNA. "In these patients, we
see prominent neurological problems associated with neuronal cell loss,"
he says. "So I can see many reasons why it might be good to target mitochondria."

CHASING AMYLOID

Amyloidosis is a class of diseases
characterized by a buildup of amyloid proteins. The methods that best represent
the amyloid-based approach to CNS disorders are amyloid vaccines and treatments
based on drugs that might inhibit secretases, which are enzymes that are
produced inside brain cells.

Among the more visible proponents
of targeting amyloids to combat CNS disorders is Rudolf Tanzi, a neurologist
at Massachusetts General-Harvard Medical School. He has helped launch two
startups focused on the amyloid hypothesis: Neurogenetics and Prana Biotechnology.
He holds an equity stake in both but is clearly more excited about Neurogenetics,
which is working on approaches to the amyloid problem and aims to have
two drug compounds in preclinical studies sometime next year.

Neurogenetics' first approach focuses
on the biological pathways that control calcium flux into and out of brain
cells. When this ebb and flow malfunctions, beta amyloid accumulates in
the cell. The other approach is focused on finding a drug that binds to
a multifunctional receptor involved with the production and breakdown of
a-beta amyloid, a type of amyloid. In a cell with excess cholesterol buildup,
there tends to be excess amyloid, too.

"There is one common event in Alzheimer's,
at least, and that is the increased production of the amyloid a-beta 42,"
says Dr. Tanzi. "We don't know if amyloid deposits are the cause, only
that they might make patients more susceptible to the disease, so if we
could find a way either to stop the production of amyloid or at least dissolve
it once it has accumulated, we just might be able to knock this disease
back." The a-beta 42 is a target because it is the chief component in amyloid
deposits. The goal is either to decrease its production or foster its breakdown.

"There's a lot of damage and debris
in the brain of a CNS patient," says Dr. Veliçelebi of Neurogenetics,
who was previously at MitoKor. "But we don't know what causes it or how
it all got there."

Numerous other firms are working
on variations of the same amyloid approach, including Durect (Nasdaq: DRRX),
Idun Pharmaceuticals, MelTec, NeuroSearch, Praecis Pharmaceuticals (Nasdaq:
PRCS), and Vertex Pharmaceuticals (Nasdaq: VRTX). Upcoming clinical trials
based on Neurogenetics's amyloid approaches will be critical tests for
the amyloid hypothesis. So far the correlation between malfunctioning amyloid
and CNS disorders is holding up.

A DRUG CALLED HOPE

No wonder CNS researchers, usually
a pessimistic lot, seem so hopeful all of a sudden. "In the next decade
or two, we'll do for people with neurodegenerative and psychiatric diseases
what we do for people with cholesterol and infectious diseases today,"
says Douglas Cole, who heads research and development at Vertex, a company
that has drugs in preclinical trials for stroke and Alzheimer's disease.
"There's reason to hope, but we're still in the early days of smart CNS
therapies."

For his part, Mr. Dykens is also
optimistic, not the least because MitoKor has two drugs in clinical trials
that it hopes will improve mitochondrial function. The first drug is in
Phase I for Parkinson's; the other drug, in Phase III, is a collaboration
with American Home Products (NYSE: AHP) involving 7,000 women to see if
the estrogen molecule might play a therapeutic role in improving mitochondrial
function in Alzheimer's patients. The more developed drug is still at least
four years from U.S. Food and Drug Administration approval and release
as a commercial product.

Despite the heady cheer, Dr. Tanzi
is quick to point out that drugs are just part of the puzzle. The molecular
diagnostics for CNS disorders are still in their early stages, too, although
genetic, genomic, and proteomic insights are providing a better understanding
of the respective roles that family history, genes, and proteins play in
CNS disorders. If the scientific challenge of making sense of those relationships
is enormous, consider the societal challenge. "Besides lack of data, the
issue of legal protection is one big unanswered question for me," says
Dr. Tanzi. "Protection against genetic discrimination has to be firmly
established before we can ever go forward with a definitive diagnostic
test."

"Everybody is just going to have
to be a little more patient," says Dr. Veliçelebi. "It won't be
easy now that we're finally starting to see some fundamental progress after
years of cranking out so much information that all added up to a whole
lot of nothing."

Write to stephan.herrera@redherring.com.

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